A $69,000 machine with a 5-year class life was purchased 2 years ago. Themachine will now be sold for $50,000 and replaced with a new machinecosting $88,000, with a 10-year class life. The new machine will not increasesales, but will decrease operating costs by $3,000 per year. Simplified straightline depreciation is employed for both machines, and the marginal corporatetax rate is 34 percent. What is the incremental annual cash flow associatedwith the project?

Depriciation on old machine= Cost / Life= 69000 / 5= 13800

Answered: A $69,000 machine with a 5-year class…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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